Paying yourself through a Ltd as a subby

[Toneyz]

Also known as a wage?????

Are you for real?

Essex I have posted that I am not an accountant and have tried to explain on here the best way that I can if you think that you can explain better than me please go ahead as I now feel that you are just trying to find fault with what I am trying to say.

 

[Nigel]

Your comment is simply not correct! Taking a dividend and not a wage is not illegal, neither is it an offence!

If a Company Director that is working for the company and is not paying themselves the NMW than this is against the Law.

 

[Nigel]

Essex I have posted that I am not an accountant and have tried to explain on here the best way that I can if you think that you can explain better than me please go ahead as I now feel that you are just trying to find fault with what I am trying to say.

As a Company Director you are an employee of the company. As such you will be paid a wage each month. Usually this is in line with the NMW. This income will be PAYE income and you will pay tax as per the tax set at the time.

After you have paid yourself then dividends can be paid if the company is in profit but if you work 50 hours a week then you should be paying yourself 50 hours a week at NMW level.

What you call a 'Directors Fee' is your PAYE wage that you will pay employers NIC, employees NIC and personal income tax on just like any other PAYE employee.

 

[Nigel]

Essex I have posted that I am not an accountant and have tried to explain on here the best way that I can if you think that you can explain better than me please go ahead as I now feel that you are just trying to find fault with what I am trying to say.

Also I am sorry if I came across rude. As the Company Director it is vital that you understand how these things work. 'I am not an accountant' does not wash with HMRC. Ultimately you will be liable, not your accountants.

 

[Toneyz]

We are aware of our liabilities. " I am not an accountant " was in reference to me being able to explain the ins and outs of tax law and regulations.

 

[rolyberkin]

I am the director of a limited company and do not take a monthly wage or directors fees, in fact nothing at all! I also work for the company. Please enlighten me where it says in legislation I cannot along with other company directors be paid a dividend if one is issued. Also are you sure that directors are not exempt from NMW legislation unless contracted!?

 

[Nigel]

We are aware of our liabilities. " I am not an accountant " was in reference to me being able to explain the ins and outs of tax law and regulations.

It was you that said you were not PAYE. You are.

 

[Nigel]

I am the director of a limited company and do not take a monthly wage or directors fees, in fact nothing at all! I also work for the company. Please enlighten me where it says in legislation I cannot along with other company directors be paid a dividend if one is issued. Also are you sure that directors are not exempt from NMW legislation unless contracted!?

It is really very simple. I take it you then take a 'Directors loan' when you need it then?

Assuming so your accountant will then work out at the end of the tax year how much to declare as PAYE and how much to declare as dividends.

'Silent' Directors that have no involvement in the day to day running of the business are exempt from the NMW. I am a Managing Director and therefor am not exempt.

There is an argument that if a Director is also on the tools then they are not actively a working Director so exempt from the NMW. However they would then need to be paid as an electrician and that then means NMW is applicable so no better off.

If you are taking 100% of your wage as dividends then this is 100% tax evasion and illegal. You are also breaking NMW laws unless you are not involved in the day to day running of the company.

 

[rolyberkin]

Again you have stated very strong views which are your own interpretation of tax laws. The NMW legislation is quite clear and doesn’t mention managing or silent directors or those ‘on the tools!’ it clearly only mentions those subject of a contract. No contract as a director NMW simply does not apply!

 

[johnduffell]

I don't want to muddy the waters but are you sure a contact has to be explicit? When i was looking at employment law for sometime who was working without a contract for a dodgy company, it appeared that a deemed concontr was automatically formed, and if the statement of employment was not provided in writing then the court would decide the terms of the contract.
Obviously that was relating to actually working for an unrelated company, but I'd be surprised if there was no equivalent here.

AsAa different topic this minimum wage thing seems risky t me as well, you'd be lucky to find an electrician happy to work for minimum wage so even then one day the hmrc might start challenging the rates of pay when working for your own company.

 

[Nigel]

Again you have stated very strong views which are your own interpretation of tax laws. The NMW legislation is quite clear and doesn’t mention managing or silent directors or those ‘on the tools!’ it clearly only mentions those subject of a contract. No contract as a director NMW simply does not apply!

If you are working as a Director on day to day activities just because you don’t have a written contract of employment does not mean you are exempt from NMW.

To pay yourself 100% in dividends is unethical and illegal.

 

[Nigel]

I don't want to muddy the waters but are you sure a contact has to be explicit? When i was looking at employment law for sometime who was working without a contract for a dodgy company, it appeared that a deemed concontr was automatically formed, and if the statement of employment was not provided in writing then the court would decide the terms of the contract.
Obviously that was relating to actually working for an unrelated company, but I'd be surprised if there was no equivalent here.

AsAa different topic this minimum wage thing seems risky t me as well, you'd be lucky to find an electrician happy to work for minimum wage so even then one day the hmrc might start challenging the rates of pay when working for your own company.

You first point is absolutley right. The courts will look at what was actually taking place if nothing is written down. Working as an electrician for a company and not being paid NMW will be seen as exactly that by the courts.

You second pount is also a good one. I do think eventually HMRC will look into what company directors pay themselves to ensure it is in-line with the average for that role.

 

[rolyberkin]

Look, everyone can have their views but it is up to accountants to decide what is best for their clients individual circumstances. Whatever anyone says there is no single rule for tax affairs and it can be a minefield. My point in all of this and what is clear is that it is not an offence to pay yourself solely a dividend as a company director. The national minimum wage legislation quite clearly states that if a director is not subject of a contract they are not bound by the legislation, it is there in black and white. In legal terms a contract is stated in law. What is ethical does not come into it and it is not illegal to pay yourself a dividend, your argument is flawed and incorrect. End of!

 

[telectrix]

what is this tax i hear so much about? i pay tax on beer, smokes, diesel, food, bills, materials, nowt left in the pot for any other taxes.

 

[Shane Mullan]

I've bitten the bullet and gone for a new accountant. She charges a monthly fee which includes self assessment, payroll, corporation tax (basically everything) so no nasty surprises this time. After just a phone call and few emails, the difference in level of service has really opened my eyes and highlighted a few things

Luckily I managed to change just in time before the new tax year and should be able to get my payroll etc set up.

Thanks everyone for comments and suggesting I change accountant